In an op-ed, Patrick Pinschmidt, the Deputy Assistant Secretary for the FSOC, argued that recent legislative proposals designed to reform the FSOC would “hamstring the FSOC, threatening to turn back the clock and potentially pave the way for a future crisis.” The bills at issue were recently approved by the House Financial Services Committee (H.R. 1550, H.R. 3340, H.R. 3557, and H.R. 2857) and would require the Federal Reserve to issue prudential standards for nonbank financial companies before the FSOC may make further designations, require certain agencies (including the SEC) to determine their votes on the Council based on their normal voting process, and open up FSOC meetings to individuals such as SEC Commissioners and Congressional staff. Pinschmidt suggested that the proposed bills “would take the council's methodical process and mire it in a series of protracted, bureaucratic steps that would require the council to spend as many as four years studying a company before it could take any action.”
Pinschmidt suggested that “the FSOC has created a culture of regulatory cooperation and interagency information sharing.” Further, the Council has “broken down interagency barriers and responded to potential weaknesses in the financial system, focusing regulators on critical issues ranging from cybersecurity vulnerabilities to addressing structural weaknesses in short-term funding markets.”
Pinschmidt pushed back on assertions that the FSOC is “overzealous,” noting that the FSOC has designated as “systemically important” only four nonbank financial companies out of thousands. These designations were driven by a “deliberative and data-driven approach” utilizing a “multi-stage process [that] relies on careful analysis of all available information, and includes intensive engagement with the company and its regulators to evaluate how the firm's distress could affect the financial system.” He noted that companies under consideration are provided the FSOC’s analysis and offered a chance for rebuttal before a final decision.